Why did Mistry stop being blue-eyed boy of Ratan Tata? All you need to know in 10 points
The ugly fallout between Tata and his favourite was in the making for years.
Cyrus Mistry was sacked from his post of chairman of Tata Sons on Monday. (Photo: PTI)
New Delhi,UPDATED: Oct 27, 2016 16:13 IST
In Short
- The board's decision was not a surprise to company insiders
- His decisions on disposition of properties was criticised
- Tata's messy fight with Docomo was the final nail in the coffin
Ahead of the Monday meeting when the board of Tata Sons decided to sack its chairman Cyrus Mistry, the rift between Mistry and the Ratan Tata-led Tata Trusts was all too apparent.
A clash of vision and a clash over decisions had strained the ties between Tata and his once blue-eyed boy. Be it about not being able to groom future leaders or the messy battle with NTT Docomo, the Tata board had major issues with Mistry and his style of functioning.
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Also read: Cyrus Mistry sacking from Tata: Tale of family discord since 1930s
A day before the explosive board meeting, Cyrus Mistry met Harvard Business School dean Nitin Nohria. During the two-hour meeting, Nohria conveyed to Mistry a message from Ratan Tata about the subject of Monday's board meeting.
10 developments leading up to the Cyrus Mistry exit
- The board's decision was not a surprise for company insiders. Earlier, in a move to tighten the noose around Mistry, Piramal Enterprises Chairman Ajay Piramal and TVS Motor Chairman Venu Srinivasan were inducted into the board on August 26. The rift between the Tata Trusts and Cyrus Mistry, thus, was exposed as the appointments made by the former were made without consulting Mistry.
- Mistry had left Tata Trusts and many key shareholders furious in June when he went ahead with the $1.4-billion acquisition of Welspun's solar farms by Tata Power without getting their consent. The trusts together control nearly 66 per cent of Tata Sons, and to go ahead with an acquisition without informing them surely riled the trustees.
- Many of Mistry's decisions on disposition of properties too didn't go down well with the old-timers. Closing down the Tata Steel UK operations was one such. Under Mistry, the group disposed of several properties that were considered a legacy of Ratan Tata and helped the group grow into a $100 billion-plus conglomerate. Once again, Mistry was not sensitive to the Trust and its legacy.
- Industry insiders point to a difference in the vision and values of Mistry and Tata that ultimately drove a wedge between the two. If some reports are to be believed, letters were sent to Mistry seeking more information on his five-year plan, his vision for the parent company, but responses were said to be sketchy. When the chairman of the Tata Trusts and the chairman of the Tata Sons are not on the same page, a split is inevitable.
- So, it was no surprise that Ratan Tata missed, or rather chose to miss, the centenary celebrations of Shapoorji Pallonji two years ago. At the event, the who's who of India Inc was present except Ratan Tata. It definitely led to tongues wagging as Tata, it was told, was enjoying a dinner with Mistry's first cousin at a fine dining restaurant. Suddenly, rumours started doing the rounds that all was not well between Tata and his blue-eyed boy.
- The final nail in the coffin, many say, was the mess that Tata Group got into while ending the alliance with NTT Docomo. Never has Tata been embroiled in such ugly battles, which Tata ultimately lost. It is well known that more than anything Tatas value their word. In this case, Ratan Tata had promised that he will protect the Japanese firm's interests come what may. Taking them to the court was surely not part of the deal.
- Mistry's micro-management did not win him too many supporters among the group's leaders. The abrupt end to the negotiations with Vodafone despite senior leadership from both the companies being involved in the discussion was a huge setback for the company. Similarly, Mistry chose not to act against Rakesh Sarna, who replaced Tata favourite Raymond Bickson in 2014 as managing director of Indian Hotels, despite repeated complaints against him.
- The Tata Group is known for producing inspirational leaders yet under Mistry such leaders were missing. Some blame it on Mistry's inability to spot talent, a must for the chairman of one the country's largest companies. A post as important as the group chief financial officer was vacant for almost three years after Ishaat Hussain retired.
- Building a Group Executive Council was seen by many as Mistry's attempt to create a dual power centre at Tata Sons. Only a handful of its members had actual operational experience of running a business. It was no surprise when most of his key advisers, including Madhu Kannan, NS Rajan, Nirmalya Kumar, were also shown the door along with him.
- Awarding contracts to the construction companies of the Shapoorji Pallonji Group even after Mistry took over as the chairman of Tata Sons was seen by many as conflict of interest. Few others also count his decision to not relinquish his Irish identity as one of the reasons for his unceremonious ouster from the company.
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